ARMENIA Law and Practice Contributed by: Hayk Hovhannisyan and Tachat Voskanyan, HAP
shares has not been fully paid. According to common practice, the buyer must confirm that they have sufficient financial resources to com - plete the transaction. If the latter has external financing or has obtained credit funds, they must submit documents confirming them. Bank guar - antees are especially common in large trans - actions. It is no coincidence that before such transactions, many companies opt to conduct financial due diligence, allowing them to assess the buyer’s financial condition to avoid possible risks. 6.7 Types of Deal Security Measures According to RA legislation, a secured right is the creditor’s right to property or property rights or obligatory rights by virtue of law or contract to secure the fulfilment of an obligation. The ful - filment of obligations can be secured in the fol - lowing ways: • pledge; • penalty; • retention of the debtor’s property; • surety; • guarantee; • advance payment; • other methods provided by law or contract; and • In practice, escrow accounts are also widely used․ 6.8 Additional Governance Rights In M&A transactions, additional governance rights can be granted by agreements concluded between shareholders, by the company’s char - ter, or directly defined by the current legislation. A shareholders’ agreement is more common, a contract that defines how shareholders will exer - cise their rights or refrain from doing so. Accord - ing to the agreement, shareholders may agree to the following.
• Vote at the general meeting in a specific way. • Co-ordinate their voting process with others. • Vote based on instructions from other parties. • Buy or sell shares at a set price or under cer - tain conditions. • Refrain from selling shares until certain condi - tions occur. • Take joint actions related to the company’s management, operations, reorganisation, or liquidation. 6.9 Voting by Proxy According to the Law “On JSC” , a sharehold- er can participate in the meeting in person or through an authorised representative. The share - holder can change their representative at any time or participate personally. The representative acts based on the Civil Code, other laws, or offi - cial regulations and must have a written power of attorney that meets legal requirements. 6.10 Squeeze-Out Mechanisms Upon the request of a shareholder who directly and solely owns at least 95% of the company’s voting shares and simultaneously the votes provided by them (Mandatory Sale Request of Company Shares), an extraordinary meeting is convened, which decides on redeeming the vot - ing shares belonging to the other shareholders of the company (except for shares belonging to the RA or communities) and providing them to the requesting shareholder. Amendments to the Law “On JSC” state that fractional shares give their owner the same rights as full shares of the same class or type, based on the size of the frac - tion they own. A fractional share is considered property, so it cannot be automatically bought back. Only a shareholder who directly owns at least 95% of the company’s shares can request a mandatory buyback.
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